Small Parcel Shipping: What Dynamic Pricing May Mean for Shippers

Small Parcel Shipping

Small parcel carriers—which are in high demand these days—have yet to develop a method for adjusting shipping rates according to supply and demand even as market conditions ebb and flow, especially in supply chain management. Some of the bigger small parcel operations, like FedEx and UPS, are beginning to turn the tide in that regard. This may be good news for everyone involved, including shippers, even if that leads to occasional higher rates in busy seasons.

One of the ways small parcel carriers are nudging rates toward a dynamic pricing model is via surcharges based on demand. This is a practice that began in the earlier days of the pandemic, when home delivery spiked rapidly, and carriers found themselves under unprecedented pressure. The practice has stuck around, and now when demand is high, the small parcel carriers are adding surcharges to the bill. This allows the carriers a way around rate increase caps. FedEx, for instance, has been adjusting surcharges on a weekly basis of late. But the company has suggested there may be more dynamic pricing to come. This might look like added costs for particularly busy delivery regions, delivery on certain days of the week, or places that can be tougher to get into and out of. UPS, on the other hand, launched a new platform for smaller customers to strike deals with their company. Using machine learning, the platform continues to get smarter and better, leading to more dynamic pricing. While none of the surcharges are particularly expensive for shippers—most fall into the 5 to 10 percent range—it will lead to substantial gains for the small parcel carriers who implement them, and with that, improved service

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